Professor Casper de Vries in the Economists’ Panel

Premature collapse of the Dutch cabinet

Th Professor notes that during Rutte IV’s cabinet, the Netherlands became a sort of compensation society, in which huge amounts of public money was involved. He notes that with policy decisions there will always be winners and losers. So, the government should dare to take these policy decisions. Not taking these decisions and buying out certain groups with subsidies and compensation has dire consequences. It weighs heavily on governmental spending and creates false expectations among residents. Indeed, people are less likely to accept the disadvantages of a policy decision and demand compensation.

American labour market

The Federal Reserve, the central bank of the United States, has a dual mandate. It needs to tackle inflation but also consider the labour market. Wages are rising hard in the United States which may further ignite inflation. The Federal Reserve may thus raise the interest rate. De Vries remarks that it is difficult for the Federal Reserve to come up with an adequate response. A raise in the interest rate now will only materialise its effects in about one year. Still, during a peak of a business cycle a central bank should pull the brake.

Additionally, the Professor points out that the high inflation in the United States is for a great extent caused by governmental stimulus. This is a phenomenon the Professor also notices in Europe, where governments bought off higher energy prices. These extra spendings lead to higher inflation. By doing so, governments work against the monetary policy of central banks.

Simplification of fiscal provisions

The state secretary of taxation and tax administration concluded that a lot of fiscal provisions are ineffective and do not function properly. De Vries explains this by pointing out that the House of Representatives tends to make a provision for every exception. Over time, these provisions pile up and counteract each other. Additionally, all these different provisions may lead to micromanagement and a loss of overview. A reorganisation of fiscal provisions may solve these issues. However, the Professor does acknowledge that a reorganisation may have redistributive consequences, even if it is done revenue neutral.